\n 0 25,000,000 0 0.10 0
\n– —————————————————————————————————-
\n 25,000,001 50,000,000 2,500,000 0.08 25,000,000
\n– —————————————————————————————————-
\n 50,000,001 100,000,000 4,500,000 0.07 50,000,000
\n– —————————————————————————————————-
\n100,000,001 200,000,000 8,000,000 0.06 100,000,000
\n– —————————————————————————————————-
\n200,000,001 300,000,000 14,000,000 0.04 200,000,000
\n– —————————————————————————————————-
\n300,000,001 400,000,000 18,000,000 0.02 300,000,000
\n– —————————————————————————————————-
\n400,000,001 and above 20,000,000 0.01 400,000,000
\n– —————————————————————————————————-
\n<\/c><\/c><\/c><\/c><\/s><\/caption>\n<\/table>\nThe equation shall be applied only once for each year in each case with the
\nvalue of the constants corresponding to the total value of the annual
\ninvestments and expenditures.<\/p>\n
22.7 The monthly statements of account referred to in Clause 22
\n(subsection 22.4) may be revised or objected to by either one of the Parties
\nas from the time when they are received by them and up to two (2) years after
\nthe end of the calendar year to which they correspond, clearly specifying the
\nitems corrected or objected to and the pertinent
\n 18
\nreason. Any account which has not been corrected or objected to within this
\nperiod, shall be considered final and correct.<\/p>\n
22.8 The Operator shall keep accounting records, vouchers and reports
\nfor the Joint Account in Colombian pesos in accordance with Colombian laws and
\nany charge or credit to the Joint Account shall be made in accordance with the
\naccounting procedure established in Exhibit “B”, which forms part of this
\ncontract. In case of discrepancy between said accounting procedure and the
\nprovisions of this contract, the terms of the latter shall prevail.<\/p>\n
22.9 The Operator may effect sales of materials or equipment during
\nthe first twenty (20) years of the Exploitation Period for the benefit of the
\nJoint Account, when the amount of the sale does not exceed five thousand
\ndollars of the United States of America (US$5,000) or its equivalent in
\nColombian pesos. This type of operations, per calendar year, may not exceed
\nthe amount of fifty thousand dollars of the United States of America
\n(US$50,000) or its equivalent in Colombian currency. The sales which exceed
\nthese amounts or those of real-estate properties must be approved by the
\nExecutive Committee. The sale of said materials or equipment shall be made at
\na reasonable commercial price in accordance with the conditions for the use of
\nthe asset.<\/p>\n
22.10 All machinery, equipment or other assets or personal property
\nacquired by the Operator for the performance of this contract charged to the
\nJoint Account, shall belong equally to the Parties. However, in the event
\nthat one of the Parties has decided to terminate its interest in the contract
\nbefore the expiration of the first seventeen (17) years of the Exploitation
\nPeriod, except as provided under Clause 25, said Party agrees to sell to the
\nother, part or all of its Interest in said items at a reasonable commercial
\nprice or at their book value, whichever is lower. In the event that the other
\nParty does not wish to purchase them within ninety (90) days following the
\nformal offer of sale, the Party wishing to withdraw shall be entitled to assign
\nto a third party the Interest corresponding to it in said machinery, equipment
\nand items. If THE ASSOCIATE decides to withdraw after seventeen (17) years of
\nthe Exploitation Period have elapsed, its rights in the Joint Venture shall
\npass at no cost to ECOPETROL.<\/p>\n
CHAPTER VI – DURATION OF THE CONTRACT<\/p>\n
CLAUSE 23 – MAXIMUM DURATION<\/p>\n
This contract shall have a maximum duration, as from its Effective Date, of
\ntwenty-eight (28) years, distributed as follows: up to six (6) years as an
\nExploration Period pursuant to Clause 5 without prejudice to the provisions of
\nClause 9 (subsection 9.3 and 9.8), and twenty-two (22) years as an
\nExploitation Period, counted as from the date of termination of the
\nExploration Period. It is understood that in the events contemplated in this
\ncontract, in which the Exploration Period is extended, the total term shall
\nnot be considered as extended in any case for more than twenty-eight (28)
\nyears.<\/p>\n
If, once the commerciality of one or more fields has been declared, THE
\nASSOCIATE continues to comply with all exploratory obligations referred to
\nunder Clause 5, it may simultaneously carry out the exploitation of such fields
\nbefore the expiration of the Exploration Period defined in Clause 4 (subsection
\n4.19). Should this be the case, the Exploitation period of 22 years will only
\nbe counted as from the expiration of the Exploration Period.<\/p>\n
CLAUSE 24 – TERMINATION<\/p>\n
This contract shall terminate in any of the following cases:<\/p>\n
24.1 Upon the expiration of the Exploration Period without THE
\nASSOCIATE having discovered a Commercial Field, except as provided in Clauses
\n9 (subsections 9.5 and 9.8) and 34.<\/p>\n
24.2 When the duration of the contract, as stipulated in Clause 23,
\nhas elapsed.<\/p>\n
24.3 At any time by decision of THE ASSOCIATE, upon compliance with
\nits obligations referred to in Clause 5 and the others contracted pursuant to
\nthis contract.
\n 19
\n24.4 For the special causes referred to in Clause 25.<\/p>\n
CLAUSE 25 – CAUSES FOR UNILATERAL TERMINATION<\/p>\n
25.1 Unilaterally, ECOPETROL may declare this contract terminated, at
\nany time before the expiration of the period stipulated in Clause 23, in the
\nfollowing cases:<\/p>\n
25.1.1 Dissolution of THE ASSOCIATE and its assignees.<\/p>\n
25.1.2 If THE ASSOCIATE or its assignees assign this contract, in whole
\nor in part, without complying with the provisions of Clause 27.<\/p>\n
25.1.3 Due to financial incapacity of THE ASSOCIATE and its assignees,
\nwhich is presumed when there is a judicial declaration of bankruptcy or a
\nmeeting of its creditors is called.<\/p>\n
25.1.4 Due to the failure to observe the obligations acquired by THE
\nASSOCIATE under this contract.<\/p>\n
At the expiration of each of the periods contemplated for the performance of
\nthe exploratory obligations, THE ASSOCIATE shall submit a written report
\nevidencing the fulfillment of the obligations for the respective period. In
\nthe event that it has been unable to fulfill these, the Operator shall have a
\nperiod of sixty (60) days to complete them diligently according to good
\noilfield practices. If this term were insufficient, the Parties may by mutual
\nagreement establish an additional term for said performance. If at the end of
\nthis period all the agreed work has still not been carried out, a default shall
\nbe declared and ECOPETROL may proceed in accordance with the provisions of
\nclause 25.3.<\/p>\n
25.2 In the event of a unilateral declaration of termination, the
\nrights of THE ASSOCIATE enunciated in this contract, both in its capacity as
\ninterested Party and in its capacity as Operator, if at the time of the
\nunilateral declaration of termination THE ASSOCIATE is both, shall terminate.<\/p>\n
25.3 ECOPETROL may not unilaterally declare this contract terminated,
\nunless sixty (60) days have elapsed after its written notice to THE ASSOCIATE
\nor its assignees, clearly specifying the causes invoked for said declaration
\nand only if the other Party has not presented satisfactory explanations to
\nECOPETROL or if THE ASSOCIATE has not remedied the fault in the performance of
\nthe contract, without prejudice to the right of THE ASSOCIATE to file the
\nlegal remedies it deems appropriate.<\/p>\n
CLAUSE 26 – OBLIGATIONS IN CASE OF TERMINATION<\/p>\n
26.1 Upon termination of the contract in accordance with Clause 24,
\neither in the Exploration or Exploitation Period, THE ASSOCIATE shall leave in
\nproduction those wells which at the time are productive and shall deliver the
\nconstructions, pipelines, transfer lines and other real properties of the
\nJoint Account (located in the Contracted Area), all of which shall become free
\nof charge the property of ECOPETROL, together with the easements and properties
\nacquired for the benefit of the contract, even if the former or the latter are
\nfound outside the Contracted Area.<\/p>\n
26.2 If this contract is terminated for any reason after the first
\nseventeen years of the Exploitation Period, all the Interest of THE ASSOCIATE
\nin the machinery, equipment and other assets or personal property used or
\nacquired by THE ASSOCIATE or by the Operator for the performance of this
\ncontract, shall pass, free of charge, to ECOPETROL.<\/p>\n
26.3 If this contract is terminated before the seventeen (17) years
\nof the Exploitation Period elapse, the provisions of Clause 22 (subsection
\n22.10) shall apply.<\/p>\n
26.4 In the event that this contract terminates upon a unilateral
\ndeclaration of termination, issued at any time, all real and personal
\nproperties acquired for the exclusive benefit of the Joint Account shall pass
\nfree of charge to ECOPETROL.
\n 20
\n26.5 At the termination of this contract for any reason and at any
\ntime, the Parties shall be obligated to perform satisfactorily their legal
\nobligations to each other and to third parties as well as those acquired under
\nthis contract.<\/p>\n
CHAPTER VII – MISCELLANEOUS PROVISIONS<\/p>\n
CLAUSE 27 – ASSIGNMENT RIGHTS.<\/p>\n
27.1 THE ASSOCIATE shall be entitled to assign or transfer, in whole
\nor in part, its interest, rights and obligations under the association
\ncontract to another person, company or group, with the prior approval of the
\nMinistry of Mines and Energy, and of the President of Empresa Colombiana de
\nPetroleos, ECOPETROL.<\/p>\n
Therefore, any project which involves a total or partial assignment or
\ntransfer of the interests, rights and obligations under the contract, must be
\ninformed to the Ministry of Mines and Energy and the President of Empresa
\nColombiana de Petroleos, ECOPETROL, by means of a certified writing of THE
\nASSOCIATE, indicating the essential items of the negotiation, such as possible
\nassignee, amount, interests, rights and obligations to be assigned, scope of
\nthe operation, etc. Within thirty (30) business days, the Minister of Mines
\nand Energy and the President of Empresa Colombiana de Petroleos, ECOPETROL,
\nshall exercise their discretionary power to analyze the qualifications of the
\npotential assignees, after which they shall adopt their determination, without
\nbeing obligated to give reasons for it. In any event, the determination of the
\nMinister of Mines and Energy shall prevail.<\/p>\n
27.2 If more than thirty (30) business days counted from the date of
\nreceipt of the application by the Ministry of Mines and Energy elapse without
\nTHE ASSOCIATE having received a reply, it shall be understood for all purposes
\nthat the application has been approved.<\/p>\n
27.3 The assignments made during the Exploration Period between
\ncompanies legally established in Colombia, will not be subject to the
\nprocedure described above and will be formalized through the written
\nauthorization of Empresa Colombiana de Petroleos, ECOPETROL, and the execution
\nof the pertinent document.<\/p>\n
27.4 Any changes or modifications in the contractual relations of THE
\nASSOCIATE with Empresa Colombiana de Petroleos, ECOPETROL, as a result of
\ntotal or partial direct negotiations in respect of interests, quotas or shares
\nin THE ASSOCIATE, shall also be subject to the approval procedure by the
\nMinister of Mines and Energy and the President of Empresa Colombiana de
\nPetroleos, ECOPETROL.<\/p>\n
27.5 Nevertheless, said changes or modifications will not require the
\nauthorization of the Minister of Mines and Energy and Empresa Colombiana de
\nPetroleos in the following cases:<\/p>\n
27.5.1 When the transactions are carried out at a stock exchange or
\nopen securities market.<\/p>\n
27.5.2 In the case of assignments or transfers resulting from events
\nbeyond the control of THE ASSOCIATE or the companies which control or direct
\nit, such as government decisions, legal judgments, partition and adjudication
\nof assets and auctions.<\/p>\n
27.5.3 When the negotiations are carried out among the companies which
\ncontrol or direct THE ASSOCIATE, or their affiliates or subsidiaries, or among
\ncompanies which form a single economic group, in which cases it shall suffice
\nto inform the Minister of Mines and Energy and Empresa Colombiana de
\nPetroleos, ECOPETROL, promptly of the assignment or transfer.<\/p>\n
27.6 Except in the cases listed above, the carrying out of any of the
\nassignments, transfers, negotiations, transactions or operations referred to
\nin this clause, without the prior OK or approval of the Minister of Mines and
\nEnergy and the President of Empresa Colombiana de Petroleos, ECOPETROL, when
\nnecessary, shall result in the application of the provisions of Clause 25 of
\nthe association contract.
\n 21
\n27.7 The operations carried out pursuant to this clause and which
\nunder Colombian tax legislation are subject to tax, shall pay the pertinent
\ntaxes.<\/p>\n
CLAUSE 28 – DISAGREEMENTS<\/p>\n
Whenever there is a discrepancy or contradiction in the interpretation of the
\nclauses of this contract in relation to those contained in Exhibit “B” entitled
\n“Operating Agreement”, the stipulations of the former shall prevail.<\/p>\n
28.2 Any disagreements which arise between the Parties regarding
\nmatters of law related to the interpretation and performance of the contract
\nand which cannot be settled amicably, are subject to the cognizance and
\ndecision of the jurisdictional branch of the Colombian government.<\/p>\n
28.3 Any difference in fact or of a technical nature which may arise
\nbetween the Parties in relation to the interpretation or application of this
\ncontract and which cannot be settled amicably, shall be submitted to the final
\ndecision of experts appointed as follows: one by each Party and, the third
\none, by mutual agreement between the principal experts appointed. If these
\ncannot agree on the designation of the third expert, the latter shall be
\nappointed at the request of either one of the Parties, by the Board of
\nDirectors of the Colombian Society of Engineers “SCI”, which has its
\nheadquarters in Santa Fe de Bogota.<\/p>\n
28.4 Any difference of an accounting nature which may arise between
\nthe Parties in relation to the interpretation and performance of the contract
\nand which cannot be settled amicably, shall be submitted to the decision of
\nexperts, who must be licensed public accountants appointed as follows: one
\nfor each Party and, a third one, by the two principal experts and, in the
\nabsence of an agreement between them and at the request of either one of the
\nParties, said third party shall be appointed by the Central Board of
\nAccountants of Bogota.<\/p>\n
28.5 Both Parties declare that the decision of the experts shall have
\nthe full effect of a settlement between them and, therefore, said decision
\nshall be final.<\/p>\n
28.6 In the event of a disagreement between the Parties regarding the
\ntechnical, accounting or legal nature of the controversy, this shall be
\nconsidered legal and Clause 28 (subsection 28.2), shall be applied.<\/p>\n
CLAUSE 29 – LEGAL REPRESENTATION<\/p>\n
Without prejudice to the rights which THE ASSOCIATE may have as a result of
\nlegal provisions or of the clauses of this contract, ECOPETROL shall represent
\nthe Parties before the Colombian authorities as regards the exploitation of
\nthe Contracted Area whenever it must do so, and shall supply the officials and
\ngovernment entities with all the data and reports which may be legally
\nrequired. The Operator shall be obliged to prepare and supply to ECOPETROL
\nthe pertinent reports. The expenses incurred by ECOPETROL in attending to any
\nmatter referred to in this clause, shall be charged to the Joint Account and
\nwhen such expenses exceed two thousand five hundred dollars of the United
\nStates of America (US$2,500) or its equivalent in Colombian currency, the
\nprior approval of the Operator shall be necessary. The Parties declare, as
\nregards any relationship with third parties, that neither the provisions of
\nthis clause nor those of any other clause of the contract, imply the granting
\nof a general power-of-attorney or that the Parties have constituted a civil or
\ncommercial partnership or any other relationship under which either one of the
\nParties can be considered jointly and severally responsible for the acts and
\nfailures to act of the other Party or as having the authority or mandate to
\nbind the other Party as regards any obligation. This contract relates to the
\noperations within the territory of the Republic of Colombia and although
\nECOPETROL is an industrial and commercial enterprise belonging to the Colombian
\ngovernment, the Parties are in agreement that THE ASSOCIATE, if such were the
\ncase, may elect to be excluded from the application of all the provisions of
\nsubchapter K entitled PARTNERS AND PARTNERSHIPS of the Internal Revenue Code
\nof the United States of America. THE ASSOCIATE shall make such election in
\nits name in the appropriate manner.<\/p>\n
CLAUSE 30 – RESPONSIBILITIES
\n 22
\n30.1 The Operator shall conduct the operations which are the subject
\nmatter of this contract in an efficient and adequate manner and in accordance
\nwith the practices of the oil industry internationally recognized for this
\ntype of operations, it being understood that it shall at no time be
\nresponsible for errors of judgment, or for losses or damages which are not the
\nresult of the Operator’s gross negligence.<\/p>\n
30.2 The responsibilities contracted by ECOPETROL and THE ASSOCIATE
\nin relation to this contract with respect to third parties shall not be joint
\nand several and, therefore, each Party shall be separately responsible for its
\nparticipation in the expenses, investments and obligations resulting
\ntherefrom.<\/p>\n
30.3 From the value of the expenses incurred and the contracts
\nentered into by the Operator in amounts exceeding forty thousand dollars of
\nthe United States of America (US$40,000) or its equivalent in Colombian pesos
\nwithout having been promptly authorized by the Executive Committee, except in
\nthe cases contemplated by Clause 11 (subsection 11.7), the only one
\nresponsible before third parties shall be the Operator, which shall therefore
\nassume the corresponding value in full. When the pertinent expense is
\naccepted by the Executive Committee, the cost of the work, study or purchase
\nwill be recognized to the Operator, in accordance with guidelines that will be
\ndefined by the Executive Committee. In the event that the expense or asset is
\nnot accepted by the Executive Committee, the Operator, if possible, may
\nwithdraw the asset in question, reimbursing the partners for any cost incurred
\nby the operation in relation to its withdrawal. When it is not possible for
\nthe Operator to withdraw said assets, or he declines to do so, the benefit or
\nequity increase resulting from these expenses or contracts shall pertain to the
\nParties in proportion to their Interest in the Operation.<\/p>\n
30.4 Ecologic Control. THE ASSOCIATE, in conducting all the
\nactivities of the contract, must comply with the provisions of the National
\nCode of Renewable Natural Resources and Environmental Protection and the
\nother legal provisions on the matter. To such end, THE ASSOCIATE agrees to
\nexecute a permanent plan of a preventive nature to guarantee the preservation
\nand restoration of the natural resources within the zones in which the
\nexploration, exploitation and transportation work which is the object of this
\ncontract is carried out.<\/p>\n
Said plans and programs shall be communicated by THE ASSOCIATE to the
\ncommunities and entities of a national and regional order related to this
\nmatter.<\/p>\n
Likewise, specific contingency plans must be established to attend to the
\nemergencies which might arise and the pertinent remedial actions must be
\ncarried out. To such end, THE ASSOCIATE must coordinate said plans and
\nactions with the competent entities.<\/p>\n
The respective programs and Budgets must be prepared by THE ASSOCIATE in
\naccordance with the pertinent clauses of this contract.<\/p>\n
All the costs incurred shall be assumed by THE ASSOCIATE during the
\nExploration Period and by both Parties, charging the Joint Account, during the
\nExploitation Period.<\/p>\n
CLAUSE 31 – TAXES, LEVIES AND OTHERS<\/p>\n
The levies and contributions which accrue after the establishment of the Joint
\nVenture and before the Parties receive their participation in the proceeds,
\nwhich are attributable to the exploitation of the Petroleum, shall be charged
\nto the Joint Account. Income, capital and supplementary taxes shall be for the
\nexclusive account of each one of the Parties to the extent corresponding to
\neach one.<\/p>\n
CLAUSE 32 – PERSONNEL<\/p>\n
32.1 After consulting with ECOPETROL, THE ASSOCIATE shall appoint the
\nManager of the Operator.<\/p>\n
32.2 In accordance with the terms of this contract and subject to the
\nregulations established, the Operator shall have autonomy to designate the
\npersonnel required for the operations referred to in this contract, being
\nentitled to fix its remuneration, functions, categories, number and conditions.
\nThe Operator shall adequately and diligently train the
\n 23
\nColombian personnel required to replace the foreign personnel which the
\nOperator considers necessary to carry out the operations of this Contract.<\/p>\n
In any event, the Operator shall comply with the legal provisions which
\nestablish the proportion of national and foreign employees and workers.<\/p>\n
32.3 Technology Transfer – THE ASSOCIATE agrees to conduct for its
\naccount a guided training program for ECOPETROL professionals in areas related
\nto the development of the contract.<\/p>\n
To comply with this obligation during the Exploration Period, the guided
\ntraining may be, among other, in the fields of geology, geophysics and related
\nareas, appraisal of reserves and description of fields, drilling and
\nproduction. The guided training shall be conducted throughout the initial
\nexploration period and its extensions, through the integration of
\nprofessionals designated by ECOPETROL into the work group which THE ASSOCIATE
\nshall organize for the Contracted Area or for other related activities of THE
\nASSOCIATE.<\/p>\n
In order to be able to renounce as mentioned in Clause 5 of this contract, THE
\nASSOCIATE must have previously complied with the training programs
\ncontemplated herein.<\/p>\n
In the Exploitation Period, the scope, duration, place, participants, training
\nconditions and other aspects, shall be established by the Executive Committee
\nof the Association.<\/p>\n
All costs of the guided training, with the exception of the labor costs
\naccruing in favor of the professionals who receive said training, shall be
\nassumed by THE ASSOCIATE in the Exploration Period and by both parties,
\ncharging the Joint Account, during the Exploitation Period.<\/p>\n
PARAGRAPH: In order to comply with the obligations regarding the Transfer of
\nTechnology as provided herein, during the first three years of the Exploration
\nPeriod and for each year, THE ASSOCIATE agrees to carry out guided training
\nprograms for ECOPETROL’S professionals, which cost is not to exceed US$30.000
\nper year. The subject matter of said programs as well as the type of program is
\nto be agreed by ECOPETROL and THE ASSOCIATE. Should the Exploration Period be
\nextended, the guided training program will consist of similar programs to the
\nones performed during the first three years.<\/p>\n
32.4 Pursuant to this Contract, during the Exploitation Period the
\nOperator shall be entitled to execute any work through contractors, subject to
\nthe power of the Executive Committee to approve those contracts in amounts
\nexceeding forty thousand dollars of the United States of America (US$40,000)
\nor its equivalent in Colombian currency.<\/p>\n
CLAUSE 33 – INSURANCE<\/p>\n
The Operator shall take all the insurance required under Colombian law.
\nLikewise, it shall require each contractor which performs work related to this
\ncontract, to obtain and maintain in force the insurance which the Operator
\nconsiders necessary. Likewise, the Operator shall take the other insurance
\nwhich the Executive Committee deems appropriate.<\/p>\n
CLAUSE 34 – FORCE MAJEURE OR ACTS OF GOD<\/p>\n
The obligations contemplated in this contract shall be suspended during the
\ntime that either one of the Parties is unable to perform them in whole or in
\npart, due to unforeseen events which constitute force majeure or acts of God,
\nsuch as strikes, lockouts, wars, earthquakes, floods or other catastrophes,
\nlaws or government regulations or decrees which prevent the obtaining of the
\nindispensable materials and, in general, any non-financial reason which
\nactually prevents the work, even if not listed above, but which affects the
\nParties and is beyond their control. If one of the Parties is unable, due to
\nforce majeure or acts of God, to perform the obligations under this contract,
\nit shall notify the other Party immediately, for its consideration,
\nspecifying the reasons for the impediment. Under no circumstances may force
\nmajeure events or acts of God extend or prolong the total exploration and
\nexploitation period beyond the twenty-eight calendar years counted as from the
\nEffective Date as stipulated in Clause 23, but any force majeure impediment
\nduring
\n 24
\nthe six (6) year exploration period indicated in Clause 5, the duration of
\nwhich is more than thirty (30) consecutive days, shall extend this six (6) year
\nperiod for the same duration of the impediment.<\/p>\n
CLAUSE 35 – APPLICATION OF COLOMBIAN LAWS<\/p>\n
For all purposes of this contract, the Parties fix as domicile the city of
\nSanta Fe de Bogota, Republic of Colombia. This contract is governed in all
\nits parts by Colombian law and THE ASSOCIATE submits to the jurisdiction of
\nthe Colombian courts and waives any attempt at a diplomatic claim as regards
\nits rights and obligations arising from this contract, except in the case of
\ndenial of justice. It is understood that there will be no denial of justice
\nwhen THE ASSOCIATE, in its capacity as Party or Operator, has had access to all
\nthe recourses and means of action which, under Colombian law, may be used
\nbefore the jurisdictional branch of the government.<\/p>\n
CLAUSE 36 – NOTICES<\/p>\n
The notices or communications between the Parties in relation to this contract
\nwill require for their effectiveness the mention of the pertinent clauses and
\nshall be sent to the Parties at the following addresses: To ECOPETROL:
\nCarrera 13 No. 36-24, Santa Fe de Bogota, Colombia. To THE ASSOCIATE:
\nCarrera 6 No. 115-65, Oficina 307, Santa Fe de Bogota, Colombia. Any change of
\naddress shall be notified in advance to the other Party.<\/p>\n
CLAUSE 37 – VALUE INCREASE OF THE PETROLEUM<\/p>\n
The payments or reimbursements referred to in Clauses 9 (subsections 9.2 and
\n9.4) and 22 (subsection 22.5), shall be made in dollars of the United States
\nof America, or in Petroleum on the basis of the prevailing price and the
\nlimitations established in Colombian legislation for the sale of the portion
\npayable in dollars, of Petroleum or Natural Gas coming from the Contracted
\nArea and intended for refining in the national territory.<\/p>\n
CLAUSE 38 – PRICES FOR THE PETROLEUM<\/p>\n
38.1 The Petroleum which corresponds to THE ASSOCIATE pursuant to
\nthis contract, intended for refining or internal supply, shall be paid for
\ndelivered to the refinery where it is to be processed or to the receiving
\nstation agreed upon by the Parties, as follows:<\/p>\n
38.1.1 The gas shall be paid for in accordance with Resolution number
\n61 of 1983, issued by the Commission of Petroleum and Natural Gas Prices and
\nDecree number 196 of January 17, 1986, issued by the President of the
\nRepublic, or the government regulations which substitute it.<\/p>\n
38.1.2 The crude oil shall be paid for in accordance with Resolution
\nnumber 013 of December 14, 1992, issued by the National Energy Commission or
\nthe government regulations which may substitute them.<\/p>\n
38.2 The differences which arise from the application of this clause
\nshall be settled by the systems established in this contract.<\/p>\n
CLAUSE 39 – DELEGATION AND ADMINISTRATION<\/p>\n
The PRESIDENT OF THE EMPRESA COLOMBIANA DE PETROLEOS – ECOPETROL- delegates to
\nthe Vicepresident of Associated Operations the administration of this Contract,
\npursuant to the laws and regulatory provisions of ECOPETROL, with capacity to
\nexercise all the measures required for the performance of this contract.<\/p>\n
CLAUSE 40 – EFFECTIVENESS<\/p>\n
This contract requires for its effectiveness the approval of the Ministry of
\nMines and Energy.
\n 25
\nIn witness whereof, this contract is signed in Santa Fe de Bogota, before
\nwitnesses, on the eighteenth (18) day of September, nineteen hundred and
\nninety-five (1995).<\/p>\n
EMPRESA COLOMBIANA DE PETROLEOS HARKEN DE COLOMBIA, LTD.
\n ECOPETROL<\/p>\n
(Signed) \/s\/ LUIS BERNARDO FLOREZ ENCISO (Signed) \/s\/ MIKEL D. FAULKNER<\/p>\n
LUIS BERNARDO FLOREZ ENCISO MIKEL D. FAULKNER<\/p>\n
President President of the Board of Directors<\/p>\n
Witnesses
\n 26
\n EXHIBIT 10.2<\/p>\n
DEVELOPMENT FINANCE AGREEMENT<\/p>\n
____________________________________________________<\/p>\n
Harken Energy Corporation<\/p>\n
and<\/p>\n
Arbco Associates L.P.,
\n Offense Group Associates L.P.,
\n Kayne, Anderson Nontraditional Investments L.P.,
\n Opportunity Associates L.P.<\/p>\n
____________________________________________________<\/p>\n
October 12, 1995
\n 27
\n TABLE OF CONTENTS<\/p>\n
\n\n PAGE
\n
\nARTICLE I Definitions and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1<\/p>\n Section 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
\n Section 1.2. References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4<\/p>\n
ARTICLE II Advancement of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5<\/p>\n
Section 2.1. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
\n Section 2.2. Requests for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
\n Section 2.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5<\/p>\n
ARTICLE III Rio Negro NPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6<\/p>\n
Section 3.1. Rio Negro NPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
\n Section 3.2. Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
\n Section 3.3. Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
\n Section 3.4. Debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
\n Section 3.5. Additional Account Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
\n Section 3.6. Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
\n Section 3.7. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
\n Section 3.8. Overpayments and Underpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
\n Section 3.9. Prudent Operator Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
\n Section 3.10. Sales of Subject Hydrocarbons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
\n Section 3.11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
\n Section 3.12. Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
\n Section 3.13. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
\n Section 3.14. Abandonments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
\n Section 3.15. Pooling and Unitization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
\n Section 3.16. Non-consent Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
\n Section 3.17. No Personal Liability; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
\n Section 3.18. Assignment by Harken Colombia or Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
\n Section 3.19. Assignment by Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
\n Section 3.20. Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16<\/p>\n
ARTICLE IV Investors Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16<\/p>\n
Section 4.1. Exercise of Investors’ Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
\n Section 4.2. Number of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
\n Section 4.3. Issuance of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
\n<\/c><\/s><\/caption>\n<\/table>\n
28<\/p>\n
\n
\n Section 4.4. Reduction of Designated Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17<\/p>\nARTICLE V Owner Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
\n Section 5.1. Exercise of Owner’s Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
\n Section 5.2. Exercise of Investors’ Second Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
\n Section 5.3. Number of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
\n Section 5.4. Issuance of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
\n Section 5.5. Reduction of Designated Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
\n Section 5.6. Investors’ Cash Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
\n Section 5.7. Payment of Cash Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20<\/p>\n
ARTICLE VI Automatic Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21<\/p>\n
Section 6.1. Conversion Upon Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
\n Section 6.2. Notice of Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
\n Section 6.3. Number of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
\n Section 6.4. Issuance of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
\n Section 6.5. Elimination of Designated Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22<\/p>\n
ARTICLE VII Owner Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22<\/p>\n
Section 7.1. Organization and Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
\n Section 7.2. Qualification to do Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
\n Section 7.3. Charter, Bylaws, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
\n Section 7.4. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
\n Section 7.5. Finders’ Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
\n Section 7.6. Authority of Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
\n Section 7.7. Non-Contravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
\n Section 7.8. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
\n Section 7.9. Reports and Financial Statements of Owner . . . . . . . . . . . . . . . . . . . . . . . . . . 24
\n Section 7.10. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
\n Section 7.11. Certificate of Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
\n Section 7.12. Owner’s Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
\n Section 7.13. Association Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
\n Section 7.14. Ownership of Harken Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
\n Section 7.15. Absence of Bankruptcy Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
\n Section 7.16. Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
\n Section 7.17. No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
\n Section 7.18. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
\n Section 7.19. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
\n Section 7.20. Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
\n Section 7.21. Continuing Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 27
\n<\/c><\/s><\/table>\n
29<\/p>\n
\n
\nARTICLE VIII Investors Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 28<\/p>\n Section 8.1. Organization and Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
\n Section 8.2. Finders’ Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
\n Section 8.3. Authority of Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
\n Section 8.4. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
\n Section 8.5. Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
\n Section 8.6. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
\n Section 8.7. Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
\n Section 8.8. Accredited Investors and Experience. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
\n Section 8.9. Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
\n Section 8.10. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
\n Section 8.11. Continuing Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 30<\/p>\n
ARTICLE IX Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
\n Section 9.1. Investors’ Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
\n Section 9.2. Conditions of Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
\n Section 9.3. Taking of Necessary Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
\n Section 9.4. Issuance of Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31<\/p>\n
ARTICLE X Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31<\/p>\n
Section 10.1. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
\n Section 10.2. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
\n Section 10.3. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
\n Section 10.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
\n Section 10.5. Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
\n Section 10.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
\n Section 10.7. Binding Effect; No Assignment; No Third Party Benefit . . . . . . . . . . . . . . . . . . . 33
\n Section 10.8. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
\n Section 10.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
\n Section 10.10. United States Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
\n Section 10.11. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 34
\n Section 10.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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